Calculate the shortfall between your insurer payout and what you owe
Gap insurance -- also known as Guaranteed Asset Protection -- is a specialist motor insurance product that covers the financial shortfall between what your standard car insurer pays out and what you originally paid for, or still owe on, your vehicle. In the UK, a new car loses approximately 15-20% of its value the moment it leaves the forecourt, and up to 40% within the first three years. This rapid depreciation creates a potentially devastating gap. If your car is written off or stolen, your motor insurer pays the current market value, not what you paid. For a GBP 25,000 car that is now worth GBP 18,000, you would receive GBP 18,000 and face a GBP 7,000 shortfall. If you are still paying off car finance, the situation can be even worse: you might owe GBP 22,000 on finance while the insurer pays out only GBP 18,000, leaving you GBP 4,000 out of pocket and still in debt for a car you no longer have. Gap insurance exists to eliminate this risk. It is particularly relevant for new and nearly new cars purchased on finance, leases, or PCP agreements. The cost is typically modest -- GBP 100 to GBP 300 for three years of cover -- compared to the potential shortfall of thousands of pounds. This calculator helps you estimate the gap you might face and the approximate cost of insuring against it.
To calculate your gap insurance requirements: 1. Enter the original purchase price of your vehicle. This is the price you paid when you bought the car, including any dealer-fitted extras and delivery charges but excluding any part-exchange value. 2. Enter the current market value. This is what your car is worth today. You can check this using valuation tools from AutoTrader, Parkers, or CAP HPI. Your motor insurer would pay approximately this amount if your car were written off. 3. If you have outstanding finance, enter the settlement figure. This is the amount you would need to pay to clear your finance agreement today. Contact your finance company for an up-to-date figure. If you own the car outright, leave this at zero. 4. Select the type of gap insurance. Return to invoice covers the difference between the insurer payout and your original purchase price. Finance gap covers the difference between the insurer payout and your outstanding finance balance. Vehicle replacement covers the cost of buying an equivalent new vehicle at today's prices (typically 10% more than the original price due to inflation and specification changes). 5. Choose the cover period. Gap insurance is typically available for 1, 2, or 3 years. Most buyers choose 3 years as the depreciation gap is widest in the early years of ownership. 6. Review the results to see your potential shortfall and the estimated annual cost of gap insurance cover.
The gap insurance calculation depends on the type of cover selected: **Return to Invoice (RTI):** Shortfall = purchase price - current market value This is the most common type. If you paid GBP 25,000 and the car is now worth GBP 18,000, the gap is GBP 7,000. **Finance Gap:** Shortfall = outstanding finance settlement - current market value Only applies when the finance balance exceeds the market value. If you owe GBP 22,000 and the car is worth GBP 18,000, the finance gap is GBP 4,000. If the car is worth more than the finance balance, there is no gap. **Vehicle Replacement:** Shortfall = estimated replacement cost - current market value The replacement cost is estimated at 110% of the original purchase price, reflecting the higher cost of buying a new equivalent vehicle today. For a GBP 25,000 original purchase, the replacement estimate is GBP 27,500, creating a gap of GBP 9,500 against a current value of GBP 18,000. In all cases, if the current market value exceeds the comparison figure, the gap is zero. The estimated gap insurance premium is calculated at approximately 2% of the gap amount per year, which represents a mid-range estimate. Actual premiums from specialist providers typically range from 1% to 3% of the gap amount, depending on the vehicle, cover type, and provider. The total premium is the annual rate multiplied by the cover period in years. For example, a GBP 7,000 return-to-invoice gap with 3-year cover: GBP 7,000 x 2% x 3 = GBP 420 total premium, or GBP 140 per year.